Wednesday, 07 October 2015 20:27
BELGRADE: Central and Eastern European currencies edged up on Wednesday as expectations the United States was about to raise interest rates faded, reviving demand for emerging market assets.
The Polish zloty, the region’s most liquid currency, traded at 4.233 to the euro, 0.26 percent up from Tuesday’s close.
The Polish central bank left interest rates unchanged at a record low of 1.5 percent on Tuesday, but its governor signalled concern that pre-election spending promises could undermine the stability of state finances.
“The sentiment is better, and the MPC yesterday wasn’t as dovish as the market expected, which all helped the zloty, and surprised all the people who were betting short ahead of election,” a Warsaw-based dealer said.
“It may well rise further this week but not so much. I expect it to remain in the range of 4.20-4.26 per euro and some more volatility shortly before the election,” he added.
Hungary’s forint traded at 311.500 to the euro, 0.25 percent up from Tuesday’s close.
A dealer in Budapest said overnight strengthening of the forint was due to interest from overseas investors.
“But the interest rate side is slowly crumbling so I would not expect a big firming,” he said.
Yields on Polish bonds were slightly up on Wednesday. The market is tracking German bunds and waiting for a switch tender planned for Thursday.
“High supply (on tenders) could initiate a light selloff in the short term, but it should not change the dominating trends. Bonds will remain dependent on core market drivers,” PKO BP’s strategist Miroslaw Budzicki said in a note.
In Hungary, demand was unusually low at a 3-month bill auction on Tuesday and the 3-month yield was fixed 10 basis points higher since Monday at 0.49 percent. The yield curve is flattening as demand for longer-term papers remains good.
